Davis Freeberg on United Online

My Coverage on Yesterday's United Online Earnings Conference Call

Editor's Note: Davis Freeberg is currently a shareholder of United Online stock. This post should not be construed as financial advice. Don't worry folks, the advertisment above is a graphic for the story, not the beginning of something new at Thomas Hawk's Digital Connection.

by Davis Freeberg

Last night when I got home, instead of watching 24 on my TiVo, I listened to the United Online Conference call instead. United Online is one of those interesting internet plays. In addition to owning dial up ISP Netzero, they also own Classmates.com, Juno, internet domain businesses, etc. Yes, my life is extremely exciting!

Usually, United's conference call is pretty dry and lacks the juicy information that Netflix, Tivo and other media companies give out, but yesterday's call was different. One of the United Online companies, Netzero a dial up ISP, announced yesterday that they are introducing, within a few months, a dial up product called 3G (3rd Generation) that is supposedly much faster then AOL’s dial up and has an "instant" internet experience similar to broadband. Customers simply click on the Net Zero internet access button and they can immediately check their email and access the net, creating a broadband like experience.

I'm not sure how this technology will actually work, but Mark Goldston, United’'s CEO was really excited about it. He said that the technology is top secret and seemed almost paranoid that Netscape and People PC would try and copy their idea. He said that it used existing caching techniques, but that there was new (top secret) technology behind it. Apparently, they have been developing the product for over a year and are ready to launch the service within three months. Goldston said that it would have broadband like speeds and will be priced well below broadband. When pressed for more details on the price, Goldston indicated that it was likely to replace their existing 2nd Generation accelerator, which current retails at $14.99 per month.

Apparently this new dial up service won't let you P2P at fast speeds and it sounds like downloading won't be as fast as the broadband, but it sounds like something that bluelight.com customers would get excited about and it really differentiates them from AOL (beyond AOL being evil and United Online being an independent start up that still gives away ad supported dial up.)

So perhaps this may mean for those of you poor souls still using dial up that you will no longer have to wait two minutes to start surfing the net. This will be really helpful for me when I want to use one of their other services, Classmates.com, to load up my high school girlfriend's picture over and over and over again. Remember folks, restraining orders don't apply to loading up someone's photo on the internet!

It's surprising to see companies continue to invest in dial up technology though, perhaps this is a sign that the transition to Broadband (and all the cool content that comes with it) will take much longer then people project -- especially among price sensitive and less sophisticated users. This type of new technology could also be positive news for rural folk who still do not have the opportunity for broadband even if they did want to pay.

Netzero is also launching a VOIP effort that sounds interesting as well. Goldston said that it would be something that was majorly different then any other VOIP product -- something that would really set them apart and not just on price. Goldston was optimistic that this would really shock the market when they introduce it.

If Netzero's VOIP package is attractive, it will certainly put pressure on the "premium” VOIP providers like Comcast, Vonage and AOL. Maybe, like their free dial up Netzero service with the annoying floating ad box that you cannot remove, they will offer free VOIP service -- you just may have to listen to a little chihuahua blurt something out on the line like, "I said "Taco Time, make a run for the border," every 30 seconds. We will see.

In the middle of the call some whacko shareholder somehow managed to get through what is usually a call reserved for equity analysts (I don't think that many people are really that interested in UNTD) and Goldston was like, “who are you?” This random guy said he was a shareholder and then proceeded to ramble on for about two minutes before Goldston had to cut him off.

The crazy shareholder guy sounded really angry, but I couldn't understand why. The company has had huge growth for 15 quarters, the management team is amazing, they gross about 615K per employee and they love buying undervalued assets and then turning them profitable. The stock's pretty volatile though and perhaps the crazy guy got burned by his own greed. At the end of the call Goldston said if anyone has further questions contact the company, then he stopped and said no wait better yet call me directly (perhaps meaning, leave us alone unless you know my private number). I love whacky shareholders. I Would love to hear one of these guys break into a Microsoft or TiVo analyst call sometime.